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Thestar:Friday May 18, 2012

EPF's buyout portion in KFCH and QSR will be around RM1.26bil

KUALA LUMPUR: The Employees Provident Fund (EPF) says it is participating in the buyout of QSR Brands Bhd and KFC Holdings (M) Bhd (KFCH), alongside Johor Corp (JCorp) and private equity firm CVC Capital Partners.This confirms earlier StarBiz reports that a government-linked investment corporation such as the EPF was being wooed to become part of Massive Equity Sdn Bhd, the special-purpose vehicle used to announce a buyout of the assets and liabilities of KFCH and QSR last December.A
joint press release by the EPF and JCorp stated that while JCorp would
maintain its 51% shareholding in Massive Equity, an “EPF-led consortium
will make up the remaining 49% via Melati Asia Holdings Ltd. Melati Asia is 51% owned by the EPF, while CVC holds the rest. Consequently, 76% of Massive Equity is in Malaysian hands.”It
isn't entirely clear what led to the EPF being brought into the buyout
structure, which will result in CVC having a smaller equity portion than
what was first announced last December.However, it has been
speculated that the involvement of the EPF in the buyout exercise was
likely to be aimed at giving Massive Equity a firmer footing from the
standpoint of funding as well as governance.

The EPF’s involvement in the buyout exercise is likely to give Massive Equity a firmer footing in funding as well as governance

The
takeover of QSR and KFCH will cost Massive Equity some RM5.24bil. EPF's
portion of this will be around RM1.26bil, a small sum when seen in
light of its massive fund size.“The EPF is confident that this
investment in a highly cash-generative business will meet our long-term
goals of providing sustainable financial growth coupled with accretive
yields. The KFC and Pizza Hut brands have been a market leader in
Malaysia for decades and we look forward to enhancing the brands and
their market share even further in future,” Datuk Shahril Ridza Ridzuan, EPF's deputy chief executive officer for investment, said in the statement.The EPF used to be a long time substantial shareholder in KFCH and had its representatives on the board of KFCH.However,
the EPF had subsequently sold down its stake in KFC and it was rumoured
that the fund had been disappointed in the way KFCH was run after it
became part of JCorp, especially the series of related party
transactions that ensued.Recall that JCorp, via 57% subsidiary Kulim (M) Bhd,
had bought control of QSR and KFCH in 2005, in the midst of one of the
many corporate tussles that was going on in the fried chicken retailer.Recall also that JCorp used to be run by Tan Sri Muhammad Ali Hashim, who had grown to become synonymous with JCorp, after leading it for more than 28 years.He left JCorp in late 2010.When the buyout by Massive Equity was announced last December, a JCorp spokesman had told StarBiz
that the exercise was part of the bigger restructuring plan that JCorp
was undergoing and aimed at streamlining its businesses. The
shareholding structure, the spokesman said, was convoluted and thus
hindered effective management of its businesses.“This will
facilitate fund-raising and the leveraging of operating assets which is
part of JCorp's overall rationalisation programme. It will also address
the debt issue at JCorp,” the spokesman had said.In yesterday's press release, JCorp president and CEO Kamaruzzaman Abu Kassim
said: “We are heartened by EPF's confidence in us and are honoured to
have them as our partner at this exciting juncture in JCorp's journey.“Indeed,
EPF's sterling track record as Malaysia's premier retirement savings
fund and an institutional investor puts us on a firmer footing to ensure
greater corporate governance and continued growth for one of our prime
investments.”